Proof of reserves (PoR) is a method by which a crypto service — usually an exchange, sometimes a casino — tries to show that it holds at least as many assets as its customers' balances. The concept spread after the collapse of FTX in 2022, when it emerged that customer money was not where it was supposed to be.
How it usually works
A full proof of reserves has two halves:
- Assets. The service shows addresses on the chain and proves it owns them, for example by signing a message with the address's key. Anyone can check the balance in a block explorer.
- Liabilities. The service gathers all customers' balances into a Merkle tree — a tree of hashes whose root is published. Each customer can check that their balance is in the tree without other balances becoming public. Background: Merkle tree on Wikipedia.
If assets are at least as large as liabilities, the service is covered at that moment.
What the proof does not show
- It is a snapshot. Assets can move right after the proof or have been borrowed for the time of the proof.
- Debts may not be visible. If the service has obligations other than customer balances, they are not reflected in the Merkle tree.
- Without the liabilities half, the proof is half a proof. Showing wallet addresses alone says how many assets there are, not whether they are enough.
- There is no audit. A self-published proof is not an independent audit unless a third party has confirmed it.
Proof of reserves at a crypto casino
Among crypto casinos proofs of reserves are rare. If a casino says it publishes them, check whether both halves are published, how often the proof is updated and whether your own balance is verifiable. A missing PoR does not automatically mean a casino is insolvent — it means you have no proof either way.
A proof of reserves does not replace a licence, reading the terms of use or a test withdrawal. It is not the same thing as provably fair: the latter proves the fairness of a single game, PoR a casino's solvency at one moment. The practical rule stays the same: do not keep more at a casino than you are prepared to lose, and move winnings to your cold wallet or a non-custodial wallet. A fuller treatment: proof of reserves at crypto casinos.